Some of the ideas developed in this chapter have been presented elsewhere, so this summary concentrates on the what’s new.

Evidence indicates that in the second quarter of the 18th century, some Parisian notaries were venturing away from the role of brokers between creditors and debtors they had acquired since the mid 1600s. In effect some of them were filling the position left empty by the absence of deposit banks (p.138). They were accepting interest-bearing deposits redeemable on demand and investing the money in different longer term assets such as bills of exchange, government debt and loans to individuals.

Moral hazards
Some notaries enjoyed enormous success in this endeavour and by the middle of the century some had accumulated several hundred thousand French pounds of deposit (an enormous amount of money; p.139). This was all the more worth of notice since the practice was officially illegal and the whole business had to be conducted with IOUs (p.140). To avoid being too obvious, the notaries generally used straw men (p.141).

On the one hand, the effect of these ventures can be considered positive: “clearly the offer of interest-bearing deposits drew forth funds that were not otherwise available for loans”. But it could also be argued that by investing themselves their clients’ capital, notaries lost the incentive to maintain their network which had made their earlier success and had considerably deepen the Parisian credit market (p.142).

Collapse

The funds deposited were not intended to remain in the hands of the notaries. They were intended to be used for some payments and were solely trusted to the notaries in the expectation of such an operation. Consequently, the turn over was very high, sometimes large sums were only deposited for a couple of days in order to gain some money over a very short period (p.143). Unsurprisingly the scheme was unstable.

During the 1740s, 50s and 60s stories of notaries declaring bankruptcy, committing suicide or escaping precipitously to Holland became common. At the worse of the crisis on average more than one office failed every year (148). The notaries tried to self-regulate but to little effect (p.149). Ultimately, with the opinion in a state of alarm, notaries were compelled to limit the amounts lend from the sums deposited by their clients. After the mid 1760s, the number of bankruptcies fell, but remained higher than what it had been fifty years earlier (p.152).

Ultimately the reputation of the notaries was re-established and they exited the crisis yet stronger as the continuous inflation of the price of an notaries office indicates (p.154).